Outseta Revenue & Valuation (2018)

hello everybody my guest today is Jeff Roberts he's co-founder becoming a let's set up a software platform that gives SAS companies all the tools they need to launch and scale a subscription business Jeff are you ready to take us to the top let's do it nation all right so tell us about this tool what do you guys do and how do you make money yes so we're a subscription business ourselves but the idea is basically if you're a startup all this a startups that we've encountered in our time as operators advisors founders are doing the same thing they're they're going out there buying a CRM system they're eventually going to buy a billing system and they need some sort of communication tools whether those are sales and marketing tools customer support tools and ultimately they're spending time stitching those solutions together integrating those tools evaluating those tools and it results in relatively unclear financial and technical overheads so we're providing a platform for the day once a past business that gives them essentially all the tools they need to launch their business working with a single vendor and how many how many folks on your team so right now there's a founding team of three and we just brought on our first outside hire as well so here I'm putting my brain kind of in the brains of people listening that are starting a SAS company right and they're looking at buying a billing solution like work early or charged with AI an email marketing tool like MailChimp or Aweber you know CRM like hub spots free hub spot an analytics tool like chart mogul right or you know payroll thing like zenefits you're arguing we do all this in one my question to you would be there's no way that you can have the kind of insight into each of those tools where each of these guys are focusing on doing this one thing really really well there's no way you can capture all that with a team of four so how do you respond to that absolutely I think there's two things one is we're taking a very long-term approach to this this business we're not out to you know grow to a hundred million dollars in revenue overnight we're not out to raise funding our founding team has worked together previously and we're in this for the long haul which which means we have more time to mature the product and build the product into what it needs to be but secondarily I think a lot of it comes from our experience scaling a previous company where we use some homegrown tools we went out and we bought HubSpot bought Salesforce we bought a whole you know series of the point solutions and ultimately at the very very early stage of a SAS startup most of those tools are over killed the actual need is for relatively basic functionality as you're trying to get your business off the ground and validate that you actually have something that's that's worth growing so what's your price plan what's the average Chester are paying per month I hope it's really it's much much cheaper than all these things added yeah so it's $99 per month that's it and then we take a two point nine percent processing fee on our billing tools which is the same as stripe for example okay so just that's the only pricing option you have it's 99 bucks a month we have a free plan for founder's it is limited to 250 contacts so basically we don't have like a free trial model we'll give you full access to the tool you can kick the tires on it for as long as you want you're just limited to a small number of contacts to kind of validate that the tool is going to do what you needed to do beyond that is $99 per month and that's that you can have as many users of the product as you want send as many emails as you want it's really all you can after that point when did you launch the company so the company's been around since December 2016 to your previous point you know it is a big engineering effort in particular so we actually launched our Minimum Viable Product January 1st of this year 2018 yes sir the begs the question how did you support yourself between 2016 and 2018 yeah so we we all have slightly slightly different scenarios but for really the short answer is we are all doing some other work I work together with one of my co-founders his name is Dmitri at a previous company called Bill diem Demetri still works a couple days a week at build him and is focused on it outside of three days a week now I'm doing something similar except I do consulting work as opposed for as opposed to working for another business and so totally bootstrap today outside of the money that you guys have put in 100% bootstrapped and what did we scale to you today in terms of total customers so we have coming up on 200 startups using the product right now and just a small number of paying customers so we have a lot of people basically on that free product that are sort of integrating the system kicking the tires getting their businesses set up properly and we've got somewhere between five and ten companies that were that are you know on a paid subscription that were very actively working with incorporating their feedback into the products and really working with them on a day to day basis got it so right now you didn't call it five hundred maybe a thousand bucks a month something like that a little bit a little bit more than that but still certainly the early days so how do you again like again I go back to your point about you know MailChimp is overkill for the beginner right and and if MailChimp was like 200 bucks a month to start and you're saying hey we get MailChimp plus all those other stuff $4.99 I get it but like they have a 2,000 subscriber free plan and so does you know these payment gateways don't charge until there's you know value going through it so and then guess what it's it's pretty easy for me to stick as Appy ORS happen between them to connect them so I'm just curious like I mean I just I'm curious what your what's going through your brain in terms of how do you focus on what battle to win first and then scale from yeah so in terms of what battle to win first we're we're definitely trying to intercept companies you know as early as possible so our lead sources are like when people publish a profile on angels last when we see a new SAS product launch on product hunt that's the right time for us to reach out and and oftentimes in addition to sort of the categories of software I've already mentioned we have tools that we've built around things like registration and authentication and how to set up lost password workflows and those sorts of things so we're really trying to get the companies you know you know at day one and give them all the tools that they need so they can go back and just focus on building their core product and nothing else and we think if we do that we have a pretty Candell compelling value prop absolutely there's tons of free tools out there as you mentioned or at least low price tools that serve startups but at the end of the day even if you're using those free tools they aren't all interconnected you are gonna spend some time whether it's with zappy or you know however you want to integrate these tools stitching them together and if those joints aren't really really good you're also losing some context on your customer's journey or losing some context on your business's performance we think there's just enormous if it's to in terms of alignment when your entire team's logging into one platform and really getting a more complete picture of your business yeah I think there are some biggest symptoms you're making that statement but I want to continue so let's assume that all that is true the next step is okay you want to start with folks who are starting out 9 bucks a month but once they mature and they need more solutions more features they're going to advance to these other tech needs are there solutions that can do more which they just have bigger dev teams they've done more than you so you have a perverse incentive for founders using you not to have success because if they do they churn yeah absolutely there's no doubt about that that's that's something we we've definitely talked about as a team and our well aware of so I'd go back to sort of the origin story of our founding team we worked together at a company called building bu il di um as a property management software company based in Boston that's done very very well for itself it's had you know a remarkable startup run really and just going from you know days day one to about five million dollars in revenue it took five or six years and if we can serve a company that's growing fast over the course of five or six years and have them use our product we think that's plenty of customer lifetime value for us to capture but again I think once people get to a million dollar run right spending 20 bucks a month on MailChimp becomes an easy decision because of the amount of other features they have that you guys don't have that's what I'm trying to figure out is like you you have a you have a really scary perverse incentive structure in your business model and that one if the small business doesn't go out of business right so which is a big if right that's where most churn comes from at this price point let's assume that they they succeed they're also gonna turn on the upper end the success stories are gonna churn and the failure stories are gonna churn I'm just curious how you fix that bucket yeah I think the obvious answer is you know we're gonna creep closer to future parity with with some of these tools certainly we're you know never going to have every feature that some of the more robust solutions do have but still for a company you know doing ten you know ten million dollars or less of revenue I think over time you will see each of the software categories that we serve creep closer to two future parity I'm curious about how you're gonna do I mean if I just take out the logos that you have well you kind of it was a nice word play on the logos on your homepage if I just add up all these tools and the funding that they write there's over a billion dollars in capital they've put into their tools there's no way you can come anywhere near future parity with these guys unless you go raise a billion two billion dollars and scale quickly you know in turn in terms of some of the tools yes but I think there's a huge difference here to these these companies have gone out and raised tons of money and funding and with that they've almost all gone upmarket they've added you know more and more features and functionality that frankly aren't relevant to an early stage startup sure MailChimp though you can still start with two thousand free thing it's free two thousand leads free you absolutely can and there's there certainly people that are going to you know go that route and that that appeals to I think a lot of the people you know what we've learned so far from our customer acquisition efforts a lot of the people that work with us yes they definitely like the notion of the single integrated platform forum doing more with less all of that resonates but they also like the brand that that we're building the way that we want to build our company and a lot of them are self-funded software entrepreneurs themselves they see sort of how we're looking to build our company and it's something that resonates with them and that's why they choose to work with us over some of these hugely funded companies yeah but if you want to be inspiring you go be a coach and you sell and you go get speaking gigs not that's not gonna make people stick in a software company mething male Trappist oh but somebody's gonna use by the way are still bootstrap my point in there in the capital comment was they put so much money behind their tech teams they're how I'm curious if you had some master plan to reach parity with them so so let me let me ask you a different question like if you've got confidence in this model why are you guys still doing side projects why not go all-in your back against the wall yeah so some of us are able to some of us aren't you know for myself personally I'm not successful financially successful enough to be able to just quit and go work on this full-time I've got bills to pay so consulting is how I do that I think as we continue to work on the product and and we grow our user base you know we're focusing on profitability from day one as I said we never want to raise money and and I think we'll all look to transition in that direction as quickly as we can but in the meantime you got to do it you got to do what is the by the way I don't think there's anything wrong with that I just think if you believe that you're gonna be five million AR soon and you have confidence in that you would be all-in and you put your back against the wall and you put your life on the line to go figure it out sure I tell you we're absolutely all-in but I need some monthly income yeah I hear ya talk to me about talk to me about activation when someone signs up for you what's the thing you know you need to get them to do in the first ten minutes of them logging on that's gonna make them extra steady yeah it's an interesting question we've been looking for sort of one single activation point and what we've learned so far is it varies pretty dramatically by by whoever the person is and what their what they're trying to accomplish one of our biggest activation challenges is just this notion of selling this whole platform startups don't go out there you know no one's out there looking for this platform that we offer startups are looking to solve their immediate need whether it's they need to send an email campaign or they need to start charging you know a customer or whatever it is so we're intercepting people at all these different points if you could go through our onboarding workflow we ask you a series of questions it's what are you trying to do right now are you trying to deploy an email campaign are you trying to start tracking your prospects and customers are you trying to set up billing and we've had a pretty even distribution of people picking off the product with those different goals in mind mm-hmm yes I think that's another I mean it was a bit of a trick question I wanted to see if there was one thing you're optimizing around the promises you have you have eight or nine different pencil focuses right so if it's a if it's a if it's the payroll part of your tool right it's getting their first three employees added if you're if it's your HubSpot competitor its number of contacts like if I asked you know been at MailChimp what it activation metric is it's get their first ten leads in the first week Brian at HubSpot even early on he would tell you it's get their first contact in the door right because it's a CRM the problem is like you don't have one singular problem to optimize around and so you're just divided and it's highly highly diluted that's absolutely true yep so how do you solve that I think you work with each customer as they come in I mean we're like I said we're a early-stage company when we have people come in the door at this point we're still doing everything we can and to make them successful we're bending over backwards if it's you know a customer reaching out to us saying hey I need to send an email campaign I'm trying to you know generate some leads I will get on the phone with them and I will work with them and talk through the campaign strategy and help them deploy that campaign if it's someone that needs to set up billing likewise and these things snowball as you know SAS is a long-term game if we can get two customers to sign up this month and for next month and six next month that's the direction things are going to go and and that's what's been happening with us so far and you know it certainly it's a challenge that a lot of other companies don't have that are more singularly focused but I think there are enormous benefits to our approach - like you said you know churn is is obviously something we have to be cognizant of in terms of do you have a system or has anyone turned no one has churned and that's one of the that's one of the beautiful things about the product - is if someone does jump it's early you have a cohort of five so let's just yeah no I hear what you're saying but my counter point is if someone does want to adopt the solution in full their entire business is operating on outside or a huge portion their business is operating on outside of so the product is stickier for that rear isn't as well yeah yeah I hear ya good stuff we'll listen I appreciate you come on let's wrap up here with the famous five number one what's your favorite business book my favorite business book the Lean Startup it's a you know a typical answer but that's that's it number two is there a CEO you're following or studying right now no but I'll give a shout-out to a CEO that's not well-known that you should absolutely talk to his name is Michael Montero he was the CEO until last week of the company I mentioned earlier called Bill diem he's a completely not well known CEO in the SAS base but but one of the best of my opinion I love gold nuggets like that number three what's your favorite online tool for building your business besides your own geez sweet number four how many hours of sleep to get every night eight and what your situation married single kiddos I am engaged Oh congratulations that's exciting no Q no kids yet right no kids yet all right probably in the next year wow that's exciting and how old are you I'm 31 alright last question what do you wish your 20 year old self knew good one I think one of the things that's really resonated with me and that gives me a lot of confidence in the direction we're going with outset is how important it is to take a long-term perspective particularly in startups you know it takes 10 years to build anything worthwhile and I think if you can afford yourself the opportunity to take that time your chances of success go up dramatically especially you have like me pushing anything about short-term stuff guys there you have it from Jeff trying to combine many of these tools that startups need and putting it all in one package at a $99 price point they've signed up five folks at 99 bucks a month team of four again launched in 2016 developed and developed and coded and coded for two years launched pricing in early 2018 Jeff thank you so much for taking us at the top Thank You Nathan appreciate it